Loan assistance declines – is the crisis over?
The share of mortgage loans in forbearance declined marginally in February, according to the Mortgage Bankers Association’s (MBA) latest Loan Monitoring Survey. The total percentage of loans in forbearance fell by two basis points from 0.40% in January to 0.38% as of February 28, 2025. MBA estimates that approximately 190,000 homeowners remain in forbearance plans, a fraction of the 8.6 million forbearances granted since March 2020.
The decline was reflected across different investor types. The forbearance share of loans backed by Fannie Mae and Freddie Mac decreased to 0.15%, while Ginnie Mae loans saw a reduction to 0.84%. Portfolio loans and private-label securities (PLS) also dropped to 0.37%.
Despite this monthly improvement, the number of forbearances and loan workouts increased compared to one year ago, according to MBA’s vice president of industry analysis, Marina Walsh.
“The year-over-year gain may be attributed to increasing escrow payments for taxes and insurance, inflationary pressures, natural disasters, aging servicing portfolios, and a softening in the labor market,” Walsh said. She also noted that loan workout performance and overall servicing portfolio health had declined from a year earlier.
Other key findings from MBA’s Loan Monitoring Survey:
- The total share of loans in forbearance declined from 0.40% in January to 0.38% in February.
- Ginnie Mae loans in forbearance decreased from 0.88% to 0.84%.
- Fannie Mae and Freddie Mac loans in forbearance dropped from 0.17% to 0.15%.
- Portfolio and PLS loans in forbearance declined from 0.40% to 0.37%.
Forbearance trends and reasons
By category, independent mortgage banks (IMBs) reported a forbearance rate of 0.40%, while depositories held steady at 0.38%. Compared to the previous year, these figures are higher, as the total share of loans in forbearance was 0.22% in February 2024.
Among borrowers in forbearance, 73.0% cited financial hardships, such as job loss, death, divorce, or disability. Another 24.2% remained in forbearance due to natural disasters, while 2.8% of borrowers continued their forbearance plans due to COVID-19.
By stage, 63.0% of loans in forbearance were in the initial plan stage, while 18.2% had entered an extension. Another 18.8% of loans had re-entered forbearance, including those with extensions.
Loan workouts, which include repayment plans, loan deferrals, and modifications, accounted for 6.49% of servicing portfolios, a slight decline from 6.53% in January but an increase from 6.04% in February 2024.
The total share of serviced loans that were current (not delinquent or in foreclosure) was 95.16% in February, down from 95.35% in January and 95.73% a year earlier.
State-level loan performance
The five states with the highest percentage of current loans were Idaho, Washington, Alaska, Oregon, and Colorado. Conversely, Louisiana, Mississippi, Indiana, West Virginia, and Alabama had the lowest share of current loans.
MBA’s Loan Monitoring Survey covers 61% of the first-mortgage servicing market, or approximately 30.7 million loans. The next report is scheduled for release on April 21, 2025.
What do you think about the latest forbearance trends? Share your thoughts in the comments below.
